Wow! What a year. I’m glad to get that behind us. But now what? Where do we real estate investors go from here? To me, it seems that caution is the word to use. 2020 brought a whirlwind of challenges and changes and I’m not so sure we will see them end in 2021.
Here are some thoughts about going forward in 2021.
Covid19 is going to be here for a while longer. That will mean that ours, and everyone else’s businesses will still be affected. Some folks are doing okay. Some are actually doing well. But many any more are hurting. Going forward I expect that things, such as rehabs and repairs, are going to take longer to do. Parts and appliances will be harder to find. People are still going to need some slack. Try to plan accordingly.
Covid19 has also generated a lot of economic uncertainty. People are nervous about the future and unsure of what to do. You can include myself in that category. Remember that in uncertain time cash is always king! Best to have some cash reserves on hand. The more the better.
Newly printed cash is flowing into the economy. This cash is in part, making its way into the real estate market because people are uncertain about where else to put it. Real estate prices are frothy and supply is low as people move to what they perceive are greener pastures. Buy cautiously right now. Remember that cash flow is especially important in frothy times. When the music stops, and it will at some point, you do not want to be the one left standing. Cash flow will help you to remain standing.
That said, it is a seller’s market. If you have been considering selling any of your real estate holdings now is the time. Prices are high and as long as the newly printed cash keeps flowing, they will likely go higher. How much higher? Who knows. Do not be greedy and try to time the top. You can’t. If you want to sell, just put it on the market now.
Furthermore, if you want to keep holding, money is cheap now and every attempt will be made to keep it cheap. Try to lock in some long term debt at these these decades low rates. Convert short term debt into long term debt now if you can, while the money is flowing.
Or, just get rid of the debt, perhaps by selling some properties and paying off others. The future is uncertain and how all of this money pumping and debt forbearance is going to unwind is anybody’s guess. It may not be pretty. Why not be the one who is holding hard assets free and clear?
Increasing amounts of landlord regulations are here to stay. The eviction moratoriums and other measures put in place due to covid19 may be rolled back some. But history shows when regulations are ratcheted up, they rarely if ever go back to where they were before. Again, how does all of this unwind politically? Will there be rent strikes? Are no-fault evictions a thing of the past? Who knows. But I bet it will be to the smaller landlord’s disadvantage.
The multi-family market is being over built. There are so many apartments going up around me here in Memphis and I simply do not know who is going to absorb all of that supply. The supply of new units is going to put pressure on rents and even with all of the money being pumped into the economy they could begin to slip down. Keep that in mind when looking at the future performance of your existing holdings or anything you are considering for purchase.
I guess the buzzword from me for the beginning of 2021 for landlords is caution. The market is high and the future is uncertain. The money pumping can’t last forever without consequences, and there will be consequences when the pumping stops. I sat on the sidelines watching during the last frothy period in 2008, maybe that is the right place to be in 2021.
Kevin Perk is the founder and publisher of Smarterlandlording.com. He is the author of Advice From Experience To New Real Estate Investors. Subscribe to Smarterlandlording here. Contact Kevin here.
